CPMC deal being renegotiated after hospital profits downgraded

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A major deal for two new seismically safe hospitals is being renegotiated after revelations that the California Pacific Medical Center might be closer to abandoning its facility serving lower-income Mission district residents.

The $2.5 billion project by the Sutter Health affiliate includes a massive new 555-bed hospital at Cathedral Hill and a rebuild of St. Luke’s in the Mission.

A deal with Mayor Ed Lee’s office requiring that CPMC make significant contributions toward health care for the poor, community clinics, affordable housing and street improvements was announced in March. It must be approved by the Board of Supervisors.

But at a committee hearing Monday, supervisors were broadsided by financial projections that might allow CPMC to escape its pledge to manage the rebuilt St. Luke’s for at least 20 years. A clause in the agreement says that CPMC could close St. Luke’s if its operating margin falls below 1 percent for two consecutive years.

The Mayor’s Office told the committee Monday that CPMC was closer to triggering that clause, and admitted that it knew of the new projections 12 days earlier and hadn’t told supervisors, who will vote on the deal next month.

Board President David Chiu called the news “shocking.” Supervisor Malia Cohen said CPMC had a history of being “disingenuous” in its negotiations.

“This is a pretty big change … and very suddenly,” said a clearly perturbed Supervisor David Campos, whose district includes St. Luke’s. He said the hospital deal’s timeline was now in question.

State law requires hospitals be seismically safe by 2015.

“It absolutely has to be fixed, but it appears to be eminently fixable,” Supervisor Scott Wiener said Tuesday.

Both the Mayor’s Office and CPMC officials downplayed the developments, saying they were committed to keeping St. Luke’s open.

“This one piece is about the ability of CPMC to respond to a potential financial catastrophe — in the worst-case scenario — very, very unlikely to come to pass,” said CPMC Vice President Judy Li.

But she acknowledged the new projections worsen CPMC's financial outlook, but said they don't indicate that they will be forced to close St. Luke's.

Li said the trigger, if met, would start a two-year “collaborative process where we’re working together as partners to try to find a solution.”

Both sides hope to come to agreement before the next committee hearing July 9.

aburack@sfexaminer.com

An earlier version of this story was corrected June 27, 2012

Correction

The story “CPMC could abandon St. Luke’s in Mission” misstated the significance of new financial projections released by the hospital chain. While the company’s agreement with The City does theoretically allow it to abandon St. Luke’s, and while CPMC’s latest projections do bring the chain closer to the trigger for that exemption, they do not meet the fiscal threshold for abandoning St. Luke’s, and CPMC officials are adamant that they will not do so.